Earlier this month, Bob Corker believed that the Republican tax bill was unconscionably reckless. The Tennessee senator had spent a decade decrying the “rapidly growing national debt” as the “greatest threat to our nation” — and months vowing to vote against any tax-cut legislation that added “one penny” to that sum. So, when he learned that the “Tax Cuts and Jobs Act” would add over $1 trillion to the deficit, Corker decided to take a lonely stand against it.
Two weeks later, Republican leaders in the House and Senate unveiled their final, consensus tax-cut legislation. The bill was nearly identical to the one Corker had voted against, except that it added even more money to the deficit — and included a special tax break for real-estate investors that would increase Bob Corker’s personal income by up to $1.2 million a year.
On Friday afternoon, Corker announced that he would vote for the bill.
Shortly after this announcement, the International Business Times threw a spotlight on how Corker stood to benefit from the bill, and “#CorkerKickback” started trending on Twitter. Liberals lamented this “act of overt corruption.” Democratic senator Chris Van Hollen implored his Republican colleagues to “do the right thing” and remove the provision. Corker, for his part, claimed ignorance of the measure — and demanded to know how a giant giveaway to wealthy investors like himself had ever made into a bill full of giant giveaways to wealthy investors like himself.
The provision unearthed by IBT is indefensible as a policy matter. And it certainly made the Tennessee senator’s flip-flop look unseemly. But there is, nonetheless, a farcical aspect to the outrage that the “Corker Kickback” has generated.
The IBT story uncovered circumstantial evidence that Corker traded his vote for a tax provision that benefits him personally. This was treated as a scandal. And yet, just two weeks ago, Wisconsin senator Ron Johnson said — publicly and repeatedly — that he would vote against the Senate bill unless it provided a larger tax break to pass-through businesses, like the one that his family owns. Mitch McConnell relented, Johnson collected his ransom, and the whole incident was covered as a legitimate policy dispute.
There is no way to argue that Corker’s alleged “kickback” is corrupt, while Johnson’s loud lobbying for his own tax break was kosher — without giving undue credence to Republicans’ rhetoric about their bill.
Before the “Corker kickback,” the GOP bill provided a 20 percent deduction to owners of “pass-through” businesses (closely held firms that don’t pay corporate taxes). But the legislation barred high-income pass-throughs that have few employees from taking full advantage of this break. The rationale here was simple: The (ostensible) point of slashing taxes on wealthy business owners was to increase hiring and middle-class wages — and since the owners of capital-intensive businesses with few labor needs are unlikely to increase either, they shouldn’t get as large a tax cut.
The last-minute provision flagged by IBT violates this principle. The measure would extend the pass-through deduction to real-estate investment firms (like those owned by Corker and the Trump family), even if they don’t employ very many people. Viewed in this light, the “Corker kickback” appears uniquely scandalous because, unlike Johnson’s ransom, it enriches GOP lawmakers without serving a coherent public policy goal.
But this appearance is deceiving. In truth, there is no coherent policy argument for slashing taxes on pass-throughs of any kind — a fact that even the Republican Party’s favorite economists will concede.
Right now, American companies that are registered as corporations must pay the corporate tax rate. This means that the owners of such companies have their business earnings taxed twice — first, as corporate profits, and then as personal income. Meanwhile, pass-through companies are allowed to distribute earnings to their owners without paying the corporate rate (in other words, their profits “pass through” to the owners’ individual returns). Thus, their earnings are taxed only once, as individual income.
The ostensible point of this policy is to make life a bit easier for small mom-and-pop businesses. But a company’s eligibility for “pass-through” status isn’t determined by size. Koch Industries, the Trump Organization, and most hedge funds are all structured as pass-through entities. The very existence of these giant pass-throughs is, essentially, an enormous loophole in our tax code. And yet, the small-business lobby — and a bunch of powerful Republican politicians who own pass-throughs — promoted the idea that it would be “unfair” to lower the corporate rate without also reducing their tax liabilities. Which is to say: Ron Johnson took the Senate bill hostage on the grounds that it was fundamentally unfair to reduce the competitive advantage that his business enjoyed over rival firms that chose not to avoid corporate taxes.
The “Corker kickback” is a small piece of the tax bill; the broader pass-through deduction is a pillar of it. The former will enrich several Republican lawmakers; the latter, a wide swath of the GOP caucus. We have only circumstantial evidence that Corker traded his vote for the real-estate investment provision, and that evidence is weak. The “kickback” measure didn’t come out of nowhere — the House bill included a similar provision on the taxation of real-estate investment firms. Utah senator Orrin Hatch says that he added the provision to the bill himself, with no input from Corker, who had no (official) role in drafting the final legislation.
Johnson, by contrast, lobbied for his ransom on the Senate floor.
All of which is to say: We don’t need to rely on tendentious, “connect-the-dot” theories to establish that the GOP tax bill is the product of corruption. Republicans have essentially conceded this fact. Polls consistently find that a large majority of the American public disapproves of the GOP tax bill — while most Republican voters oppose the deficit-financed corporate tax cuts that are the very heart of the legislation. Meanwhile, virtually every credentialed economist — including some of the GOP’s own high priests of supply-side voodoo — find the plan indefensible. When lawmakers craft regressive legislation reviled by the public and experts alike, it stands to reason that their work is being corrupted by special interests.
But there’s no need for such reasoned speculation: Last month, Senator Lindsey Graham said that his party needed to pass its tax cut bill because otherwise, the “financial contributions will stop.” Meanwhile, Congressman Chris Collins implored his colleagues to push the legislation through because, “my donors are basically saying, ‘Get it done or don’t ever call me again.’”
In this context, treating the “Corker kickback” as proof of the Republican Party’s corruption is a bit like treating circumstantial evidence that the Hamburglar filled his “water cup” with fountain soda as proof that he steals from McDonald’s.
None of this is to say that IBT didn’t do important work in spotlighting the provision. As a microcosm for the GOP bill as a whole, you can’t do much better than a tax cut that was explicitly targeted at the owners of business that don’t create many jobs; has no economic justification; directly enriches GOP lawmakers and the president; and was quietly slipped into a 500-page bill without any public debate over its wisdom. The “Corker Kickback” is a monstrosity, even if it wasn’t actually designed as kickback to Bob Corker.
As for Corker himself, the fact that he (probably) isn’t personally responsible for corrupting the GOP bill is hardly exonerating. The senator has still given no credible explanation for his flip-flop. To rebut the notion that he was swayed by a bribe, Corker has insisted that he didn’t even know what was in the final legislation when he decided to vote for it. “I had like a two-page summary I went through with leadership,” Corker told reporters. “I never saw the actual text.”
In other words, Corker didn’t trade his integrity for a tax break — but rather, for nothing at all.